- The future success of any company – whether it is a large holding company, a subsidiary, a start-up, or a public body – depends on how effectively the organization adjusts to new challenges and continuous change. At Arthur D. Little, we combine our industry expertise and organizational know-how to develop and implement high-performance processes and organizations. Together with you, we can mobilize and energize the real change agents in your organization – your people.
- Strategy is about making conscious decisions about the actions to take and not to take. It aims to point at the overall direction while preserving high flexibility to adapt to environmental changes. Arthur D. Little’s launch of the high-performance business model in the 1990s (often referred to as the S/P/R/O model) triggered a holistic approach to strategy. It is built on the premise that balanced stakeholder satisfaction and the alignment of strategies, processes, resources and organization are crucial to sustainable success. Over the years, numerous senior executives have applied that S/P/R/O logic and witnessed its impact on the creation of value. Innovative in its simplicity, the S/P/R/O model is still valid and widely used today – it is everyone’s thinking in the 21st century. Senior executives who are determined to be winners and create future history will put that thinking into practice.
- Below, you find examples of services that we offer our clients, several of which build on lessons learned from applying the S/P/R/O model in thousands of assignments across the world.
- Relations between HQ and subsidiaries are often guarded or adversarial, be it in a multi-business or multi-location corporate setting. HQ and subsidiaries may be unable to fully align on short-term and long-term objectives and directions, leading to failure to fully leverage the performance potential of the group. Priorities, focus and management style of HQ and subsidiaries may diverge, leading to shareholder value destruction and value creation opportunity loss.
- Arthur D. Little’s methodology is based on the development of an HQ-subsidiary engagement model customized for the portfolio of businesses in the group, detailing the engagement model in terms of roles and modes of engagement between HQ and subsidiaries, the codification of the engagement model in terms of engagement guidelines, and the alignment of the solution across all stakeholders to make it implementable.
- Industries are witnessing a second wave of diversification geared towards innovation and disruptive technology. Handling diversification in an era of industry convergence is crucial to clients. Diversification strategies have been pursued by corporations for decades as a means by which to create long-term value and achieve sustained growth. The intent and benefits of such diversification in terms of shareholder returns, sustainability of corporations, managerial intent and behavior have long been discussed. The evolution of the industrial landscape into one of increasing “convergence” and dynamism has given rise to new, existentially driven investment models for corporate diversification.
- Arthur D. Little has developed a framework to bring a holistic perspective of developing an investment strategy for diversification in an era of convergence. The framework maps the “Mature” or “Emerging” nature of targeted business against the decision of whether to “Make” (from scratch internally through organic expansion) or “Buy” (via acquisition to expand inorganically). This demarcates four distinct investment models: “Harvest”, “Acquire”, “Scout” and “Invent”.
- Traditional investment models were principally focused on “Acquire” and “Invent”. However, the “Era of Convergence” puts much more pressure on corporations to “Harvest” internal capabilities in convergent industries, and to “Scout” and invest in technology start-ups that are developing products or services that threaten to disrupt traditional business models.
- Designing a unique and differentiating company vision enables strengthening business strategy, enhancing customer experience and transforming the company. “Sense of purpose” is becoming key to addressing companies’ challenges and society mega-trends. In a fast-moving environment, companies need to define a “verticality” that is clear, not limited in time and resilient to environment and strategy. The globalization and digitalization of the world make differentiation crucial for companies, in order not to be diluted and commoditized.
Subsequently, customers are no longer looking for products, but for service, experience and engagement, and employees have changed their relationships with work from professional ambition to meaning.
- We believe that brand purpose is the next major challenge for ambition-driven strategy – a cause Arthur D. Little has historically been committed to. In the digital age, focusing on the “meaning” can be even more powerful than on the “what”.
- Arthur D. Little has developed a methodology based on “Why design” and “Company regeneration”, allowing companies to define unique and differentiating points of view and branded customer experience, and to drive company change and transformation through brand and CEX vision. We regularly partner with brand and communication agencies- and have built a solid expert network to successfully implement winning strategies.
Ambition-Driven Strategy and Condition-Driven Strategy
- Organizations seek our advice for innovative approaches to strategy development to cope with the inherent uncertainty in today’s business environment. Strategy entails not only the strategic priorities (dos and don'ts), but also the strategic planning process. What is needed from a strategy development and maintenance process is twofold: it needs the flexibility to anticipate and react to changes in the business environment, at the same time as providing long-term direction, clear objectives and organizational alignment.
- Arthur D. Little has developed a range of methodologies, such as Ambition-Driven StrategyTM (ADS) and Condition-Driven StrategyTM (CDS), to respond to strategy development needs, on both corporate level and strategic business unit (SBU) level. Aligning ambitions, conditions and strategic plans with business plans and budgets is a key part of the work we do.
Ambition-Driven Strategy and Condition-Driven Strategy
- Condition-Driven Strategy is ideal in the medium-long term, when:
- Current strategy is not aligned with internal and/or external conditions
- Internal conditions have changed or will change, e.g., M&A activity, reorganization, financial position, change in ownership structure
- External conditions have changed or will change, e.g., customer demand and preferences, competitive landscape, major technical breakthroughs
- Overall performance is low due to unknown or complex/unclear reasons, or the industry is mature
- Ambition-Driven Strategy is ideal in higher uncertainty and the long term:
- ADS is ideal to manage uncertainty in growing industries, and to create stretching ambitions that inspire organizations
- ADS creates an ambition among managers to shape the future by visualizing future trends, issues and dynamics
- Businesses continuously face unsteady and challenging waters as the world becomes more complex and change happens every day. Nonetheless, most businesses support their decision-making processes using simple and static net present value or internal rate of return calculations – failing to assess the uncertainties present in the underlying assumptions. Scenario development helps to get a grip on the future industry landscape while acknowledging the inherent uncertainty. It represents a valuable tool in situations of high uncertainty – however, valuable and creative input is crucial. Scenario development is able to combine quantitative as well as qualitative drivers influencing the future industry landscape. The incorporation of a broad range of views helps to create confidence regarding the future within the company. Key drivers can be captured in the strategic control system, allowing the monitoring of the business environment (“early-warning system”). Today’s decision-making processes need to adapt to the trends of the volatile and fast-moving business environment. Decision-making has to become quicker, and take uncertainties in a large base of assumptions into account. Using traditional approaches, this challenge may be unmanageable for decision-makers, who are then compelled to rely on simplified metrics with unknown input quality.
- Arthur D. Little has developed a pragmatic approach based on the Monte Carlo method, which allows thorough evaluation of the risk in business cases. Using this approach, businesses can reduce their downside potential and maximize the outcomes of their decisions.
View of the World
When developing the (long-term) growth strategy, a company must know its own innovation platform (IPF) as a differentiator and the future view of the world (VOW). VoW is the idealistic/dreaming “situation” from your own standpoint, which will be achieved through your business. “Situation” includes views from customers/clients, market, world, earth, global
- Corporate governance: Corporate governance has become a key topic on the corporate agenda. Management and board members recognize the value of having a coherent and credible governance system in place, first and foremost for clear and transparent decision-making, authority and accountability, but also to mitigate risks and comply with regulatory requirements as stipulated by, for example, by the Sarbanes-Oxley Act. Arthur D. Little has long experience of auditing and creating governance frameworks for organizations that are effective, compliant with regulations, and aligned with business processes. We always strive for minimizing bureaucracy and overhead costs. Our experience spans corporations, mid-sized businesses and public-sector clients.
- Corporatization: Arthur D. Little offers strategic and financial advisory services with regards to corporatization of state-owned authorities. With corporatization, assets are revalued, debt structures are revisited and interest rates on loans are changed. In order to understand the operational and financial implications of such changes, Arthur D. Little combines scenario-planning methodologies and regulatory outlooks with corporate valuation techniques and provides a second opinion on what, and what level of, key ratios owners and management should apply. Allowances of grace periods are frequently discussed to avoid dramatic non-desired, one-time effects.
- Privatization: Arthur D. Little is accustomed to drawing up roadmaps for privatization, working closely together with government bodies. The approach for each object is individualized and based on the regulatory frameworks to which the object is exposed. Whether it is energy, telecom, railways, postal services, airports or healthcare infrastructure, Arthur D. Little puts together a team with vast sector and functional experience, including strategy and corporate-finance skills, to make sure that the full potential value of the object is realized. We know how to attract the most attractive acquirers, how to deal with timing issues, and how to make sure that a competitive market is achieved.
- Deregulation: Arthur D. Little works with government bodies and institutions to optimize deregulation in industries that thrive on competition to ensure sufficient innovation and investments. As an example of our broad base of experience with deregulations, we identified priorities for removing non-tariff barriers to trade in the EEC so Europe could become a single enlarged market. Moreover, Arthur D. Little produced the first white paper on deregulation of telecommunications in the European Union in 1980s by request of the European Commission.
Litigation & Dispute Resolution
- Arthur D. little provides an independent expert opinion in support of a contractual or legal dispute or in anticipation of a dispute, or as part of a negotiation process. Our approach involves educating counsel, close work with legal teams and other experts analyzing facts/data, and drawing conclusions based on experience, as well as the production of reports, modeling and testimony.
- Procurement plays an increasingly important role in the economy. The pressure on public & private buyers increases as budgets are reduced, service quality requirements are tightened and available procurement tools become more complex. A higher degree of service content has created new forms of partnership, with an increasing degree of “procured service content”. Buyers and suppliers need to address a list of success factors to generate value from new forms of partnerships.
- Arthur D. Little has broad expertise, enabling support of public- and private-sector clients in all aspects of tender management. Arthur D. Little’s offering for buyers covers all steps of public tender management: needs and strategy definition, procurement form choice and contract-performance monitoring. We support suppliers in writing and packaging winning tenders, as well as performing contract execution correctly and on time.
Strategy by Analogy
Strategic and organizational problems in specific industries sometimes appear more complex and novel than they actually are. Instead, chances are that another industry has endured the same types of problems already.
By drawing on our wide- spanning industry competencies, we can provide insight and solutions that may seem innovative in one specific industry, but have been successfully implemented in another.
The method of Strategy by Analogy is powerful, as it brings perspective and can help a company avoid pitfalls that other industries have endured. Arthur D. Little can help your organization with relevant analogies, provide the right workshop environment to establish a creative and engaging process, and make sure that major pitfalls of Strategy by Analogy, such as superficiality (when similarities are too superficial to be relevant) and confirmation bias (when management finds evidence in a specific solution, although there are other solutions and analogies that are more relevant), are avoided
Value-Based Management (VBM)
Arthur D. Little defines value-based management (VBM) as the methodology of creating, measuring and managing for value. The philosophy is simple – the value of a company is defined as its discounted future cash flows.
Value is created when capital is invested at returns exceeding the cost of capital. VBM is an approach that facilitates rational decision-making and focusing of attention on the true value drivers and risk elements of a company.
It entails managing the P&L as well as the balance sheet. Arthur D. Little applies VBM in a rigorous way by combining industry expertise with VBM expertise, and recognizes the difficulties of balancing short- and long-term priorities.
Managing the business cycle is key to sustaining profitability. The ability to grow the organization in an efficient way, or to handle macro-economical downturns, requires an enterprise that is prepared and adaptable in terms of costs, competencies, processes and customers.
Management teams often struggle with executing current strategies and at the same time making those critical changes that will significantly improve competitiveness in the long run.
Companies that can adapt their organizations according to these factors are better positioned to seize opportunities in business upturns, and will be able to outperform industry rivals in stagnating business climates. Arthur D. Little has extensive experience in the field of Business Cycle Management, utilizing our proven concepts and global resources to create superior competitiveness for our clients in the next business cycle.
- A large number of enterprises worldwide are family-owned businesses. Some studies suggest that family-run businesses have a competitive advantage over businesses with other types of ownership. However, many family businesses also fail because of challenges in corporate governance, disputes among family members, disputes with non-family employees, high reliance on the owner, or difficulty carrying out succession into the next generation.
- Arthur D. Little has developed an in-depth understanding of family-run businesses and the dynamics of the key constituents – family, business and ownership. We work actively with the key success factors of running a family business more effectively: articulation of a family constitution, building of long-term relationships with non-family-member employees, and development of a customized family-business governance structure.